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Spain's economic prospect bleaker than IMF projection: FUNCAS

The Spanish economy will contract by 1.7 percent in 2012 and shrink further in 2013 by 1.5 percent, the Spanish Foundation of Savings Banks (FUNCAS) said here on Friday, in a much bleaker projection compared with that of the International Monetary Fund (IMF) earlier this week.

Unemployment, which stood at 22.85 percent at the end of last year, would rise to 24.5 percent by 2012 yearend, and 26.3 percent by 2013, FUNCAS said.

The FUNCAS' projections are a lot more pessimistic that those published by the IMF earlier this week, which expected Spain's economic output to contract by 1.8 percent this year, but to swing back to positive territory and grow by 0.1 percent in 2013. It put Spain's unemployment rate at 24.2 percent this year and 23.9 percent by the end of 2013.

Commenting on the Madrid's ambitious plan to cut the government's public deficit down to 3 percent of the country's gross domestic production by 2013, the FUNCAS report said it would be possible only if Madrid adopted "new large scale cuts in public spending and introduces substantial rises in VAT and in special taxes."